**UNITED
      STATES**




**SECURITIES
      AND EXCHANGE COMMISSION**




**WASHINGTON,
      D.C. 20549**




**FORM
      10-Q**




(Mark
      One)




xQuarterly
      Report
      Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934




**For
      the quarterly period ended March 31, 2006**




or


oTransition
      Report
      Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934




For
      the
      transition period from  to




**Commission
      File Number 000-51368**




**TBS
      INTERNATIONAL LIMITED**




(Exact
      name of registrant as specified in its charter )


**Bermuda**
            **98-0225954**(State
                or other jurisdiction of
              incorporation
                or organization)
            (IRS
                Employer Identification No.)**Commerce
                Building,**
              **Chancery
                Lane,**
              **Hamilton
                HM 12, Bermuda**(Address
                of principal executive offices)**(441)
                295-9230**(Registrant's
                telephone number, including area
                code)




(Former
                name, former address and former fiscal year, if changed since last
                report)




Indicate
                by check mark whether the registrant (1) has filed all reports
                required to be filed by Section 13 or 15(d) of the Securities
                Exchange Act of 1934 during the preceding 12 months (or for such
                shorter
                period that the registrant was required to file such reports), and
                (2) has been subject to such filing requirements for the past 90
                days. YesxNo ̈Indicate
                by check mark whether the registrant is a large accelerated filer,
                an
                accelerated filer or a non-accelerated filer. (See definition of
                “accelerated filer and large accelerated filer”) in Rule 12b-2 of the
                Act).
              
              Large
                Accelerated Filer ̈Accelerated
                Filer ̈Non-accelerated
                FilerxIndicate
                by check markwhether
                the registrantis
                a shell company (as defined by Rule 12b-2 of the Act).
                Yes ̈Nox





As
                of May 2, 2006, the registrant had outstanding 14,290,496 Class A
                common
                shares, par value $0.01 per share, and 13,404,461 Class B common
                shares,
                par value $0.01 per share.







**TBS
                INTERNATIONAL LIMITED****2006
                FORM 10-Q****Table
                of Contents****Page****PART
                I:  FINANCIAL INFORMATION**Item
                1
            Financial
                StatementsConsolidated
                Balance Sheets as of December 31, 2005 and March 31, 2006
                (Unaudited)
            
            3Consolidated
                Statements of Income (Unaudited)for the three months ended March
                31, 2005
                and March 31, 2006
            
            4Consolidated
                Statements of Cash Flows (Unaudited)for the three months ended March
                31,
                2005 and March 31, 2006
            
            5Consolidated
                Statement of Changes in Shareholders' Equity (Unaudited) for the
                three
                months ended March 31, 2006
            
            6Notes
                to Consolidated Financial Statements
            
            7Item
                2
            Management’s
                Discussion and Analysis of
                Financial Condition and Results of Operations
            
            16Item
                3
            Quantitative
                and Qualitative Disclosure About
                Market Risk
            
            29Item
                4
            Controls
                and Procedures
            
            30**PART
                II:  OTHER INFORMATION**Item
                1
            Legal
                Proceedings
            
            30Item
                1A
            Risk
                Factors
            
            30Item
                2
            Unregistered
                Sales of Equity Securities and Use of
                Proceeds
            
            30Item
                3
            Defaults
                Upon Senior Securities
            
            31Item
                4
            Submission
                of Matters to a Vote of Security
                Holders
            
            31Item
                5
            Other
                Information
            
            31Item
                6
            Exhibits
            
            31Signatures
            
            32

































2


**Part
      I.    FINANCIAL INFORMATION**


**Item
      1.    Financial Statements**




**TBS
      INTERNATIONAL LIMITED AND SUBSIDIARIES**




CONSOLIDATED
      BALANCE SHEETS (UNAUDITED)





**December
                  31,**
              
              **March
                  31,****2005**
              
              **2006****(unaudited)****Assets**Current
                assetsCash
                  and cash equivalents
              $
              27,157,681
              
              $
              24,967,725Charter
                  hire receivable, net of allowance of $694,214 in 2005 and $459,210
                  in
                  2006
              
              
              25,548,113
              
              
              17,812,490Claims
                  receivable
              
              
              457,087
              
              
              1,027,580Due
                from agents
              
              
              570,763
              
              
              1,386,547Other
                receivables
              
              
              398,246
              
              
              678,794Fuel
                and other inventories
              
              
              7,635,432
              
              
              6,614,480Prepaid
                expenses
              
              
              2,186,500
              
              
              1,522,975Advances
                to affiliates
              
              
              9,841
              
              
              53,362Total
                  current assets
              
              
              63,963,663
              
              
              54,063,953Deposit
                  for vessel purchase
              
              
              -
              
              
              810,000Restricted
                  cash
              
              
              532,500
              
              
              532,500Vessels,
                net of accumulated depreciation of $42,420,572in
                  2005 and $48,839,214 in 2006
              
              
              266,930,678
              
              
              264,559,970Other
                fixed assets, net of accumulated amortization of $917,299in
                  2005 and $1,113,149 in 2006
              
              
              2,589,232
              
              
              3,308,358Goodwill
              
              
              8,425,935
              
              
              8,425,935Investment
                in joint venture
              
              
              -
              
              
              470,607Total
                  assets
              
              $
              342,442,008
              
              $
              332,171,323**Liabilities
                  and Shareholders' Equity**Current
                  liabilitiesDebt,
                current portion
              
              $
              31,458,053
              
              $
              32,399,561Obligations
                under capital lease, current portion
              
              
              3,348,340
              
              
              3,743,399Accounts
                payable
              
              
              4,726,588
              
              
              6,696,363Accrued
                expenses
              
              
              25,958,807
              
              
              16,780,672Voyages
                in progress
              
              
              2,118,901
              
              
              2,052,796Advances
                from affiliates
              
              
              1,408,658
              
              
              269,459Total
                  current liabilities
              
              
              69,019,347
              
              
              61,942,250Debt,
                long-term portion
              
              
              74,279,409
              
              
              64,751,494Obligations
                under capital lease, net of current portion
              
              
              21,354,681
              
              
              20,377,292Total
                  liabilities
              
              
              164,653,437
              
              
              147,071,036COMMITMENTS
                AND CONTINGENCIES (Note 12)Shareholders'
                equityCommon
                shares, New Class A, $.01 par value75,000,000
                  authorized, 14,290,496 shares issued and outstanding
              
              
              142,905
              
              
              142,905Common
                shares, New Class B, $.01 par value30,000,0000
                  authorized, 13,404,461 shares issued and outstanding
              
              
              134,045
              
              
              134,045Warrants
              
              
              20,747
              
              
              20,747Additional
                paid-in capital
              
              
              87,585,744
              
              
              87,585,744Retained
                earnings
              
              
              89,905,130
              
              
              97,216,846Total
                  shareholders' equity
              
              
              177,788,571
              
              
              185,100,287Total
                  liabilities and shareholders' equity
              
              $
              342,442,008
              
              $
              332,171,323




The
      accompanying notes are an integral part of
      these consolidated financial statements.




Table
          of Contents
 3




**TBS
      INTERNATIONAL LIMITED AND SUBSIDIARIES**




CONSOLIDATED
      STATEMENTS OF INCOME
      (UNAUDITED)




**Three
                Months Ended March 31,****2005**
            
            **2006****Revenue**Voyage
                revenue
            
            $
            46,135,336
            
            $
            49,319,289Time
                charter revenue
            
            
            14,773,727
            
            
            14,170,306Other
                revenue
            
            
            -
            
            
            265,477Total
                revenue
            
            
            60,909,063
            
            
            63,755,072**Operating
              expenses**Voyage
            
            
            
            18,374,942
            
            
            22,736,923Vessel
            
            
            19,698,939
            
            
            18,631,003Depreciation
              and amortization of vessels and other fixed assets
            
            
            2,379,165
            
            
            6,474,259Management
                fees
            
            
            1,266,576
            
            
            -General
              and administrative
            
            
            1,397,164
            
            
            5,789,542Total
                operating expenses
            
            
            43,116,786
            
            
            53,631,727Income
                from operations
            
            
            17,792,277
            
            
            10,123,345**Other
              (expenses) and income**Interest
                expense
            
            
            (1,673,984
            )
            
            (2,916,340
            )Other
              income
            
            
            75,065
            
            
            104,711Total
                other expenses, net
            
            
            (1,598,919
            )
            
            (2,811,629
            )**Net
              income**
            
            
            16,193,358
            
            
            7,311,716Amount
                allocated to participating preferred shareholders
            
            
            (4,298,246
            )
            
            -Net
              income available for common shareholders
            
            $
            11,895,112
            
            $
            7,311,716**Earnings
                per share**Net
                income per common shareBasic
            
            $
            0.84
            
            $
            0.26Diluted
            
            $
            0.58
            
            $
            0.26Weighted
                average common shares outstandingBasic
            
            
            
            14,097,023
            
            
            27,983,829Diluted
            
            
            
            20,385,775
            
            
            28,088,329



















The
      accompanying notes are an integral part of
      these consolidated financial statements.




Table
          of Contents
 4


**TBS
      INTERNATIONAL LIMITED AND SUBSIDIARIES**




CONSOLIDATED
      STATEMENTS OF CASH FLOWS
      (UNAUDITED)


**Three
                  months ended March 31,****2005**
              
              **2006****Cash
                flows from operating activities**Net
                income
              
              $
              16,193,358
              
              $
              7,311,716Adjustments
                to reconcile net income to net cashprovided
                by operating activitiesDepreciation
                and amortization
              
              
              2,379,165
              
              
              6,614,492Write-off
                of bad debts
              
              
              -
              
              
              (235,004
              )Loss
                in joint venture
              
              
              -
              
              
              29,393Changes
                in operating assets and liabilitiesDecrease
                  in charter hire receivable
              
              
              962,729
              
              
              7,970,627Decrease
                  (increase) in claims receivable
              
              
              9,989
              
              
              (570,493
              )(Increase)
                  in due from agents
              
              
              (116,649
              )
              
              (815,784
              )Decrease
                  (increase) in other receivables
              
              
              1,849,781
              
              
              (280,548
              )(Increase)
                  decrease in fuel and other inventories
              
              
              (850,236
              )
              
              1,020,952Decrease
                  in prepaid expenses
              
              
              1,861,432
              
              
              663,525Increase
                  in accounts payable
              
              
              13,878
              
              
              1,969,775Increase
                  (decrease) in accrued expenses
              
              
              1,734,680
              
              
              (9,178,135
              )(Decrease)
                  in voyages in progress
              
              
              (184,888
              )
              
              (66,105
              )(Decrease)
                  in advances from/to affiliates, net
              
              
              (305,382
              )
              
              (1,182,720
              )Net
                cash provided by operating activities
              
              
              23,547,857
              
              
              13,251,691**Cash
                  flows from investing activities**Vessels
                acquisition/capital improvement costs
              
              
              (42,794,108
              )
              
              (4,962,910
              )Deposits
                  for vessel purchases
              
              
              3,725,000
              
              
              (810,000
              )Investment
                in joint venture
              
              
              -
              
              
              (500,000
              )Net
                  cash used in investing activities
              
              
              (39,069,108
              )
              
              (6,272,910
              )**Cash
                  flows from financing activities**Dividends
                paid
              
              
              (150,000
              )
              
              -Stock
                  issuance cost
              
              
              (670,079
              )Repayment
                  of debt principal
              
              
              (2,076,040
              )
              
              (8,586,407
              )Proceeds
                  from debt
              
              
              31,000,000
              
              
              -Reduction
                  of obligations under capital leases
              
              
              (1,134,180
              )
              
              (582,330
              )Net
                  cash provided by financing activities
              
              
              26,969,701
              
              
              (9,168,737
              )Net
                  increase (decrease) in cash and cash equivalents
              
              
              11,448,450
              
              
              (2,189,956
              )Cash
                and cash equivalents beginning of period
              
              
              21,674,204
              
              
              27,157,681Cash
                and cash equivalents end of period
              
              $
              33,122,654
              
              $
              24,967,725**Supplemental
                  cash flow information**Interest
                paid
              
              $
              1,512,496
              
              $
              1,980,614




The
      accompanying notes are an integral part of
      these consolidated financial statements.


Table
          of Contents
 5




**TBS
      INTERNATIONAL LIMITED. AND SUBSIDIARIES**




CONSOLIDATED
      STATEMENT OF CHANGES IN SHAREHOLDERS'
      EQUITY (UNAUDITED)





**Additional****Common
                  Shares**
              
              **Warrants**
              
              **Paid-in**
              
              **Retained****Shares**
              
              **Amount**
              
              **Shares**
              
              **Amount**
              
              **Capital**
              
              **Earnings**
              
              **Total**Balance
                  at December 31, 2005
              
              
              27,694,957
              
              $
              276,950
              
              
              288,853
              
              $
              20,747
              
              $
              87,585,744
              
              $
              89,905,130
              
              $
              177,788,571Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              7,311,716
              
              
              7,311,716Balance
                  at March 31, 2006 (unaudited)
              
              
              27,694,957
              
              $
              276,950
              
              
              288,853
              
              $
              20,747
              
              $
              87,585,744
              
              $
              97,216,846
              
              $
              185,100,287




































































The
      accompanying notes are an integral part of
      these consolidated financial statements.


Table
          of Contents
 6


**TBS
        INTERNATIONAL LIMITED AND SUBSIDIARIES**
 **NOTES
        TO UNAUDITED CONSOLIDATED FINANCIAL
        STATMEMENTS**
  **Note
        1 — Basis of Presentation**
  TBS
        International Limited (the "Company" or "our") is an ocean transportation
        services company that offers worldwide shipping solutions through liner,
        parcel,
        bulk and vessel chartering services. Substantially all the related corporations
        of the Company are foreign corporations and conduct their business operations
        worldwide. The accompanying unaudited consolidated financial statements have
        been prepared in accordance with generally accepted accounting principles
        for
        interim financial information and with the instructions to Form 10-Q and
        Article
        10 of Regulation S-X. Accordingly, they do not include all of the information
        and footnotes required by generally accepted accounting principles for complete
        financial statements. In the opinion of management, all adjustments (consisting
        of normal recurring accruals) considered necessary for a fair presentation
        have
        been included. Operating results for the three month period ended March 31,
        2006
        are not necessarily indicative of the results that may be expected for the
        year
        ended December 31, 2006.
  The
        consolidated balance sheet at December 31, 2005 has been derived from the
        audited financial statements at that date, but does not include all of the
        information and footnotes required by generally accepted accounting principles
        for complete financial statements.
  For
        further information, refer to the consolidated financial statements and
        footnotes thereto for the year ended December 31, 2005 included in the Company's
        filing on Form 10-K filed on March 16, 2006.
  **Note
        2 — New Accounting Pronouncements**
  In
        May
        2005, the Financial Accounting Standards Board (‘‘FASB’’) issued SFAS No. 154,
‘‘ *Accounting
        Changes and Error Corrections* ’’
        (‘‘SFAS 154’’), which replaces Accounting Principles Board Opinion (‘‘APB’’) No.
        20 ‘‘ *Accounting
        Changes* ’’,
        and
        SFAS No. 3 ‘‘ *Reporting
        Accounting Changes in Interim Financial Statements* ’’.
        SFAS
        154 changes the requirements for the accounting for and reporting of a change
        in
        accounting principle, and applies to all voluntary changes in accounting
        principles, as well as changes required by an accounting pronouncement in
        the
        unusual instance that it does not include specific transition provisions.
        Specifically, SFAS 154 requires retrospective application to prior period’s
        financial statements, unless it is impracticable to determine the
        period-specific effects or the cumulative effect of the change. SFAS 154
        does
        not change the transition provisions of any existing pronouncement. SFAS
        154 is
        effective for the Company for all accounting changes and corrections of errors
        made beginning January 1, 2006.
  In
        December 2004, the FASB issued SFAS No. 123R, “ *Share-Based
        Payment* ”
(‘‘SFAS
        123R’’). SFAS No. 123R revises previously issued SFAS 123 “ *Accounting
        for Stock-Based Compensation”* ,
        supersedes APB No. 25 “ *Accounting
        for Stock Issued to Employees* ”,
        and
        amends SFAS Statement No. 95 “ *Statement
        of Cash Flows”* .
        SFAS
        123R requires the Company to expense the fair value of employee share options
        and other forms of share-based compensation for the annual periods beginning
        after June 15, 2005. The cost will be recognized over the period during which
        an
        employee is required to provide services in exchange for the award. The
        share-based award must be classified as equity or as a liability and the
        compensation cost is measured based on the fair value of the award at the
        date
        of the grant. In addition, liability awards will be re-measured at fair value
        each reporting period. The
        Company adopted SFAS 123R effective January 1, 2006, using the modified
        prospective method which requires measurement of compensation cost for all
        stock-based awards at fair value on date of grant and recognition of
        compensation over the service period for awards expected to vest. The adoption
        of SFAS 123R did not have a significant impact on the Company’s consolidated
        results of operations, cash flows or financial position because the use of
        the
        intrinsic value method under Accounting Principles Board Opinion No. 25
        "Accounting for Stock Issued to Employees" previously used by the Company
        and
        the fair value base method currently used under SFAS 123R result in the
        same amount of compensation expense recognized. See Note - 10 - Stock
        Plan.
    Table
            of Contents
 7
 **Note
        3 — Acquisition of TBS Shipping Services Inc. and Roymar Ship Management,
        Inc.**
  The
        Company acquired all of the outstanding shares of common stock of two of
        its
        affiliates,TBS Shipping Services Inc. ("TBS Shipping Services") and Roymar
        Ship
        Management, Inc. ("Roymar"), in connection with its initial public offering,
        which was completed on June 29, 2005. The transaction was accounted for as
        a
        purchase combination; accordingly, the results of operations of TBS Shipping
        Services and Roymar have been included in the consolidated financial statements
        since the date of acquisition. TBS Shipping Services provides the Company
        and
        its subsidiaries with vessel voyage operational management, and commercial,
        chartering, agency and brokerage services. Roymar acts as technical ship
        manager
        for the Company and its subsidiaries. The Company purchased all the stock
        of TBS
        Shipping Services and Roymar for $7.3 million, which represents the purchase
        price of $7.5 million plus the undistributed earnings of each company for
        the
        period January 1, 2005 through the date of acquisition of $0.6 million that
        was
        paid in September 2005, less net cash acquired of $0.8 million. The excess
        of
        the purchase price paid over the net book value of the acquired companies
        was
        $8,425,935 which was recorded as goodwill. Current assets and liabilities
        were
        recorded at fair market value. The fair market value of office equipment
        and
        furnishings approximates their carrying value. Pro forma information is not
        presented as the effects of these acquisitions are not material to the Company's
        consolidated financial position, results of operations or operating cash
        flows
        in any of the periods presented.
  The
        following table summarizes the estimated fair values of assets acquired and
        liabilities assumed at the date of acquisition:
  **TBS
                    Shipping**
                
                **Roymar
                    Ship****Description**
                
                **Services
                    Inc.**
                
                **Management
                    Inc.**
                
                **Total**Current
                    Assets
                
                $
                1,012,981
                
                $
                200,222
                
                $
                1,213,203Office
                    equipment and Furnishings
                
                
                1,025,816
                
                
                381,562
                
                
                1,407,378Goodwill
                
                
                6,429,727
                
                
                1,996,208
                
                
                8,425,935Total
                    assets acquired
                
                
                8,468,524
                
                
                2,577,992
                
                
                11,046,516Liabilities
                    assumed
                
                
                (2,686,177
                )
                
                (268,850
                )
                
                (2,955,027
                )**Net
                    assets acquired**
                
                **$**
                **5,782,347**
                
                **$**
                **2,309,142**
                
                **$**
                **8,091,489**
 **Note
        4 — Fuel and Other Inventories**
  Fuel
        and
        other inventories consist of the following:
 **Description**
                
                **December
                    31, 2005**
                
                **March
                    31, 2006**Fuel
                
                $
                5,970,795
                
                $
                4,705,233Lubricating
                    Oil
                
                
                1,153,277
                
                
                1,279,585Other
                
                
                511,360
                
                
                629,662**TOTALS**
                
                **$**
                **7,635,432**
                
                **$**
                **6,614,480**
 **Note
        5 — Deposits for Vessel Purchases**
  On
        December 29, 2005, the Company agreed to acquire the multipurpose tweendecker *Kibishio
        Maru* to
        be
        renamed *Aztec Maiden* for
        $8 . 1 million.
        A deposit of $ 810,000 was paid on January 3, 2006, in connection with this
        acquisition. On May 2, 2006, a payment of $7.3 million was made when the
        vessel
        was delivered.
   Table
            of Contents
 8
 **Note****6 — Advances to / from Affiliates**
  Advances
        to / from affiliates, which are entities related by common shareholders,
        are
        non-interest-bearing, due on demand and expected to be collected or paid
        in the
        ordinary course of business, generally within the year. The Company typically
        advances funds to affiliates in connection with the payment of management
        fees,
        commissions and consulting fees. Advances from affiliates originated primarily
        from amounts due to affiliates for management fees, commissions and consulting
        fees earned.
 
 **Note****7 — Accrued Expenses**
  Accrued
        expenses consist of the following :
  **Description**
                
                **December
                    31, 2005**
                
                **March
                    31, 2006**Drydock
                
                $
                4,189,594
                
                $
                4,865,658Voyage
                    and vessel expenses
                
                
                17,695,881
                
                
                11,051,871Payroll
                    and related costs
                
                
                2,554,445
                
                
                183,336Commissions
                
                
                967,745
                
                
                166,392Cargo
                    Claim
                
                
                369,999
                
                
                265,000Other
                    Expenses
                
                
                181,143
                
                
                248,415Total
                
                $
                25,958,807
                
                $
                16,780,672
 The
        drydocking expense for the three months ended March 31, 2006 and 2005 was
        $1,093,488 and $854,206, respectively.
  **Note
        8 — Financing**
  The
        Company's outstanding debt balances were as follows:
  **Interest
                    Rate at**
                  **March
                    31, 2006**
                
                **December
                    31, 2005**
                
                **March
                    31, 2006**GMAC
                    credit facility loan,expires
                    June 18, 2009
                
                8.330%
                
                $
                15,156,250
                
                $
                14,218,750Merrill
                    Lynch credit facility loan,expires
                    September 1, 2009
                
                7.654%
                
                
                9,641,003
                
                
                8,111,371Merrill
                    Lynch credit facility loan,expires
                    December 16, 2010
                
                7.130%
                
                
                17,500,000
                
                
                15,260,725The
                    Royal Bank of Scotland creditfacility
                    loan, expires March 23, 2010
                
                6.00%
                
                
                6,385,000
                
                
                6,130,000AIG
                    credit facility loan,expires
                    March 10, 2010
                
                7.69%
                
                
                35,180,209
                
                
                33,117,709Bank
                    of America credit facility loan,expires
                    June 10, 2010
                
                7.36%
                
                
                21,875,000
                
                
                20,312,500Debt
                    balance
                
                
                
                $
                105,737,462
                
                $
                97,151,055
 Table
                  of Contents
 9
 The
              repayment of debt over the next five years and thereafter is as
              follows:
 2006
                      (April 1, 2006 - December 31, 2006)
                  
                  
                  
                  
                  
                  $
                  24,728,4032007
                  
                  
                  
                  
                  
                  
                  25,812,6222008
                  
                  
                  
                  
                  
                  
                  21,433,8852009
                  
                  
                  
                  
                  
                  
                  17,867,7122010
                  
                  
                  
                  
                  
                  
                  7,308,433Thereafter
                  
                  
                  
                  
                  
                  
                  -$
                  97,151,055
 **GMAC
        Credit Facility**
  The
        credit facility with GMAC was for the original amount of $22.5 million. The
        Company drew down $15.0 million in July 2004 to replenish the Company's working
        capital in connection with the acquisition of three vessels and $7.5 million
        in
        February 2005 in connection with the acquisition of an additional vessel.
        Interest on loans under the credit facility is at the "Adjusted 30-Day LIBOR,"
        as defined in the loan agreement, plus 3.7% and is payable monthly in arrears.
        Payments of principal are due monthly over 60 months from the draw down date,
        with half of the amount borrowed due over the first 24 months and the balance
        payable over the remaining 36 months. Loans under the credit facility are
        collateralized by First Preferred Ship Mortgages on the vessels *Mohegan
        Princess* , *Tayrona
        Princess* , *Tuckahoe
        Maiden* and *Taino
        Maiden* and
        assignment of freight revenue and insurance on such vessels.
  The
        credit facility agreement contains certain financial covenants which require
        that the Company have fixed charge coverage and funded debt to earnings before
        interest, taxes, depreciation and amortization, (”EBITDA”) ratios within defined
        limits. At March 31, 2006, the Company was in compliance with these
        covenants.
  **Merrill
        Lynch Credit Facility**
  The
        original amount of the credit facility with Merrill Lynch was $15.0 million.
        The
        Company drew down the full facility in August 2004, to replenish the Company's
        working capital in connection with the acquisition of two vessels. Interest
        is
        at 7.654% and is payable monthly. Payments of principal are due monthly over
        60
        months from the draw down date, with 55% of the amount borrowed due over
        the
        first 24 months and the balance payable over the remaining 36 months. The
        credit
        facility is collateralized by First Preferred Ship Mortgages on the vessels *Iroquois
        Maiden* and *Manhattan
        Princess* and
        assignment of freight revenue and insurance on such vessels. On December
        15,
        2005, the credit facility was amended removing the requirement for the Company
        to maintain positive working capital. In addition, the credit facility agreement
        requires minimum collateral coverage and requires mandatory prepayment or
        delivery of additional security in the event that the fair market value of
        the
        mortgaged vessels falls below 160% of the outstanding loan balances. The
        Company
        prepaid approximately $2.3 million on March 24, 2006.
  In
        December 2005, the Company borrowed $17.5 million under a second credit facility
        with Merrill Lynch. The Company drew down the full facility to replenish
        the
        Company's working capital in connection with the acquisition of two vessels.
        Interest is at LIBOR plus 2.5% and is payable monthly. Payments of principal
        are
        due monthly over 60 months from the draw down date, with 55% of the amount
        borrowed due over the first 24 months and the balance payable over the remaining
        36 months. The credit facility is collateralized by First Preferred Ship
        Mortgages on the vessels *Biloxi
        Belle* and *Maori
        Maiden,* assignment of freight revenue and insurance on such vessels, and second
        Preferred Ship Mortgages on the vessels *Iroquois
        Maiden* and *Manhattan
        Princess* and
        second assignments of freight revenue and insurance on such
        vessels.
  **The
        Royal Bank of Scotland Credit Facility**
  The
        credit facility with The Royal Bank of Scotland was for the original amount
        of
        $7.15 million. The Company drew down the full facility in December 2004,
        to
        replenish the Company's working capital in connection with the acquisition
        of
        the vessel *Wichita
        Belle* .
        Interest is at LIBOR plus 1.5%, compounded monthly and paid quarterly. Payment
        of principal is due in 20 quarterly installments of $255,000 commencing on
        June
        30, 2005 (six months after drawdown). A balloon installment of $2,050,000
        is
        payable with the last quarterly installment on March 23, 2010. The credit
        facility is collateralized by a First Preferred Ship Mortgage on the vessel *Wichita
        Belle* and
        assignment of freight revenue and insurance. The credit facility requires
        that
        the Company maintain a monthly average of $1,500,000 on deposit with the
        bank.
  Table
            of Contents
 10
 **AIG
        Credit Facility**
  The
        original amount of the credit facility with AIG was $45.0 million. The Company
        drew down $23.5 million in March 2005 to replenish the Company's working
        capital
        in connection with the acquisition of four vessels and $ 21.5 million in
        April
        2005 in connection with the acquisition of three vessels. Interest on loans
        under the credit facility is at the 90-Day LIBOR plus 3.15% and is payable
        monthly in arrears. Payments of principal are due monthly over 60 months
        from
        the draw down date, with 55% of the amount borrowed due over the first 24
        months
        and the balance payable over the remaining 36 months. Loans under the credit
        facility are collateralized by First Preferred Ship Mortgages on the vessels *Siboney
        Belle* , *Ainu
        Princess* , *Tamoyo
        Maiden* , *Mohawk
        Princess* , *Rockaway
        Belle* , *Tuscarora
        Belle* and *Miami
        Maiden* and
        assignment of freight revenue and insurance on such vessels.
  The
        credit facility agreement contains certain financial covenants which require
        that the Company have fixed charge coverage, debt to EBITDA, EBITDA to debt
        service, debt to net worth ratios and working capital ratios within defined
        limits. The agreement also requires that the Company maintain minimum cash
        and
        cash equivalent balances. At December 31, 2005, the Company was in compliance
        with all covenants except for the EBITDA to debt service ratio. The lender
        agreed to reduce the required EBITDA to debt service ratio from 2.0 to 1.0
        to
        1.6 to 1.0 at March 31, 2006, June 30, 2006, September 30, 2006 and December
        31,
        2006, after which it will revert to the original ratio requirement. At March
        31,
        2006, the Company was in compliance with these covenants.
  **Bank
        of America Credit Facility**
  The
        credit facility with Bank of America is for $25.0 million. The Company drew
        down
        $7.8 million in June 2005 for working capital use and the balance of $17.2
        million on July 21, 2005, to replenish the Company's working capital in
        connection with the acquisition of the vessels *Shinnecock
        Belle,*  *Maya
        Princess* and *Chesapeake
        Belle* .
        Interest on loans under the credit facility is at adjusted LIBOR plus 2.75%
        or a
        base rate, as defined in the agreement, plus 1.25% as selected by the Company
        at
        the time of the drawdown and is payable monthly in arrears. Payments of
        principal are due quarterly over 20 quarters, with 50% of the amount borrowed
        due over the first eight quarters, 40% over the next eight quarters and the
        balance payable over the remaining four quarters. The loan under the credit
        facility is collateralized by First Preferred Ship Mortgages on the vessels *Shinnecock
        Belle,*  *Maya
        Princess* and *Chesapeake
        Belle* and
        assignment of freight revenue and insurance on such vessels.
  The
        credit facility agreement contains certain financial covenants which require
        that the Company have fixed charge coverage and debt to EBITDA ratios and
        net
        worth within defined limits. The agreement also requires that the Company
        maintain minimum cash and cash equivalent balances. At December 31, 2005,
        the
        Company was in compliance with all covenants except for the EBITDA to debt
        service ratio. On March 3, 2006, the Bank of America agreed to amend the
        credit
        facility agreement to change the method used in calculating the EBITDA to
        debt
        service ratio. At March 31, 2006, the Company was in compliance with these
        covenants.
  In
        addition, certain of the above credit facility agreements contain restrictive
        covenants which among other things, require minimum collateral coverage,
        restrict the payment of dividends and restrict leverage, investment and capital
        expenditures without consent of the lender. Certain agreements require mandatory
        prepayment or delivery of additional security in the event that the fair
        market
        value of the acquired vessels falls below limits specified in the loan
        agreements.
  **Citibank
        Revolving Credit Facility**
  On
        June
        14, 2005, the Company, through two of its subsidiaries Newkirk Navigation
        Corp.
        and Frankfort Maritime Corp., entered into a $12.0 million revolving credit
        facility with Citibank, N.A. The term of the revolving credit facility commenced
        on June 17, 2005 (date of first borrowing), and will end on May 31, 2006.
        Outstanding borrowings under the revolving credit facility bear interest,
        at the
        borrower's option at the time of borrowing either at (i) the higher of a
        floating base rate determined by Citibank and an average three-month certificate
        of deposit rate plus 0.5%, or (ii) at a rate equal to LIBOR plus 2.0%. The
        Company is required to pay a commitment fee of 0.25% on any amounts not drawn
        down under this facility. Interest on amounts outstanding under the revolving
        credit facility is payable every three months. Advances may be prepaid at
        any
        time without penalty and must be repaid in full no later than May 31, 2006.
        The
        Company and two of its subsidiaries are guarantors under this facility. The
        facility is collateralized by First Preferred Ship Mortgages on the vessels *Dakota
        Belle* and
        the *Shawnee
        Princess* .
        At
        March 31, 2006 no borrowings were outstanding under the facility.
  
 Table
            of Contents
 11
 **Note****9 — Equity Transactions**
  **Preference
        Shares**
  On
        February 7, 2001, the Company issued 1.0 million mandatorily redeemable
        preference shares at a fair value of $10 per share, for an aggregate fair
        value
        at date of issuance of $10,000,000, which paid a 7% per annum dividend, payable
        on a quarterly basis. The Company has paid 12 quarterly dividend payments
        "in-kind." In-kind dividend payments were added to the recorded value of
        the
        mandatorily redeemable preference shares with an offset to additional paid-in
        capital.
  On
        March
        30, 2004, the Company amended the mandatorily redeemable preference shares
        to
        eliminate the mandatory redemption provisions, remove the payment of dividends,
        establish a semi-annual 15 cents-per-share dividend and permit the conversion,
        at the option of the holder, of each preference share to two old Class C
        common
        shares.
 
 On
        June
        29, 2005, in connection with the Company's initial public offering, the holders
        of the Company's convertible preference shares exercised their right to convert
        their 1,000,000 issued and outstanding convertible preference shares into
        2,000,000 old Class C common shares. Conversion of the preference shares
        into
        Class C common shares constituted payment in full of the preference
        shares.
  **Other
        Equity Transactions**
  On
        June
        29, 2005, in connection with the Company's initial public offering ,
        the
        Company adopted new corporate bye-laws which resulted in the consolidation
        and
        redesignation of shares. The Company redesignated its 1,500,000 Class A,
        1,500,000 Class B and 3,000,000 Class C common shares (after giving effect
        to
        the conversion of the preference shares) on a 2.5-for-1 basis to 600,000
        old
        Class A, 600,000 old Class B and 1,200,000 old Class C common shares, for
        the
        purpose of changing the par value of the Company's common shares from $.004
        per
        share to $.01 per share, and redesignated the Company's outstanding old Class
        A
        (600,000 shares), old Class B (600,000 shares) and old Class C common (1,200,000
        shares) shares as 2,400,000 new Class B common shares. Concurrent to the
        consolidation and redesignation of common shares, the Company issued 2.167
        new
        Class A common shares and 3.20 additional new Class B common shares for each
        new
        Class B share outstanding.
  **New
        Class A and New Class B Common Shares**
  The
        Company has two classes of common shares that are issued and outstanding
        - Class
        A and Class B. The Class A common shares and Class B common shares have
        identical rights to dividends, surplus and assets on liquidation; however,
        the
        holders of Class A common shares are entitled to one vote for each Class
        A
        common share on all matters submitted to a vote of holders of common shares,
        while holders of Class B common shares are entitled to one-half of a vote
        for
        each Class B common share.
  The
        holders of Class A common shares can convert their Class A common shares
        into
        Class B common shares, and the holders of Class B common shares can convert
        their Class B common shares into Class A common shares at any time. Further,
        the
        Class B common shares will automatically convert into Class A common shares
        upon
        transfer to any person other than another holder of Class B common shares,
        in
        each case as long as the conversion will not cause the Company to become
        a
        controlled foreign corporation, as defined in the Internal Revenue Code or
        the
        Class A common shares cease to be regularly traded on an established securities
        market for purposes of Section 883 of the Internal Revenue Code.
   Table
            of Contents
 12
 **Warrants**
  Warrants
        were issued by the Company in connection with its emergence from bankruptcy
        in
        2001. The warrant agreement includes an anti-dilution provision that adjusts
        the
        number of shares issuable upon exercise of the warrants whenever the Company
        issues additional common shares or engages in similar transactions. The Series
        A
        warrants were exercisable if the first Preferred Ship Mortgage Notes were
        not
        paid in full by February 8, 2005 and, when exercised, would represent
        approximately 27% of the total outstanding shares of the Company on a fully
        diluted basis. The Series B warrants were exercisable if the preference shares
        were not paid in full by February 8, 2006 and, when exercised, would represent
        approximately 6% of the total outstanding common shares of the Company on
        a
        fully diluted basis. The Series C warrants were exercisable only if the exercise
        conditions of the Series A and Series B warrants were satisfied and, when
        exercised, would represent approximately 7% of the total outstanding common
        shares of the Company.
  The
        first
        Preferred Ship Mortgage Notes were paid on June 29, 2005 and accordingly,
        the
        Series A warrants became exercisable. In
        connection with the initial public offering, the holders of the Company's
        convertible preference shares exercised their right to convert the convertible
        preference shares into Class C Common shares. As the conversion of the
        preference shares constituted payment in full of the preference shares, the
        exercise condition for the Series B and Series C warrants became incapable
        of
        being met as of June 29, 2005. As a result of the anti-dilution provisions
        of
        the warrant agreement, following the conversion of all the outstanding
        preference shares into Class C common shares, the number of common shares
        issuable upon exercise of all outstanding Series A warrants increased from
        1,769,231 to 2,167,539 Class C common shares. The issuance of 7,000,000 new
        Class A common shares in connection with the initial public offering further
        increased the number of shares issuable upon exercise of all outstanding
        Series
        A warrants from 2,167,539 to 2,901,403 Class C common shares. The number
        of
        shares issuable under the Series A warrants were 2,515,368 new Class A common
        shares and 4,874,357 new Class B common shares, after giving effect to the
        common share conversion that took effect on June 29, 2005 as described above
        in
        Other Equity Tranasctions. On June 29, 2005, Series A warrants to purchase
        2,125,392 Class C common shares, or 1,842,606 new Class A and 3,576,590 new
        Class B common shares, held by certain existing shareholders were exercised.
        In
        addition, in connection with the initial public offering, the 662,952 Series
        A
        warrants to purchase 574,434 new Class A and 1,113,155 new Class B common
        shares
        held by these shareholders were cancelled.
  At
        March
        31, 2006, there were outstanding exercisable warrants to purchase 98,328
        new
        Class A and 190,544 new Class B common shares, held by parties not affiliated
        with existing shareholders. The warrants are exercisable for a period of
        ten
        years following the date on which their exercise condition was met (February
        8,
        2005), at a price of $.01 per share.
  **Note
        1****0 — 2005 Equity Incentive Plan**
  The
        Company adopted an Equity Incentive Plan in 2005, which authorizes the grant
        of
        "non-qualified" shares to employees, independent directors and affiliates.
        The
        maximum number of share s
        that
        can be granted under the incentive plan is 2,000,000 shares. The incentive plan
        became effective on the date of the Company’s initial public offering, at which
        time the Company issued 100,000 restricted Class A common shares, vesting
        in
        equal installments over four years commencing one year after issuance, to
        its
        Executive Vice President and Chief Financial Officer (CFO), and 4,500 restricted
        Class A common shares, vesting one year after issuance, to its independent
        directors. The weighted average grant date fair value per share was $10.
        The
        Company’s consolidated financial statements for the three months ended March 31,
        2006, include compensation costs of $62,500 for our Executive Vice President
        and
        CFO. At March 31, 2006, there is $812,500 of unamortized compensation costs
        related to non-vested restricted stock awarded to our CFO, and the remaining
        weighted average vesting period over which cost is expected to be recognized
        is
        3.25 years. The Company’s consolidated financial statements for the three months
        ended March 31, 2006, include compensation costs of $11,250 for our independent
        directors. At March 31, 2006, there is $11,500 of unamortized compensation
        costs
        related to non-vested restricted stock awards, which is expected to be
        recognized in the next quarter ended June 30, 2006.
   Table
            of Contents
 13
 **Note****11 — Earnings Per Share**
  In
        accordance with Financial Accounting Standards Board (“FASB”) Statement (“SFAS”)
        No. 128, “Earnings per Share,” the following table sets forth the computation of
        basic and diluted net income per share for the three months ended March 31,
        2006
        and March 31, 2005:
 **Three
                    Months Ended March 31,****2005**
                
                **2006****Numerators:**Net
                    income
                
                $
                16,193,358
                
                $
                7,311,716Net
                    income allocated to preference shares
                
                
                (4,298,246
                )
                
                -Net
                    income available for common shareholders (basic and
                    diluted)
                
                $
                11,895,112
                
                $
                7,311,716**Denominators:**Basic-weighted
                    average common shares outstanding
                
                
                14,097,023
                
                
                27,983,829Restricted
                    stock issued to employees
                
                
                
                
                
                104,500Dilutive
                    effect of Series A, B & C warrants
                
                
                6,288,752
                
                
                -Diluted-weighted
                    average common shares and potential common shares
                    outstanding
                
                
                20,385,775
                
                
                28,088,329**Income
                    per common share:**Basic
                
                $
                0.84
                
                $
                0.26Diluted
                
                $
                0.58
                
                $
                0.26
  The
        calculation of earnings per share for the three months ended March 31, 2006,
        includes 104,500 restricted Class A common shares issued to an officer and
        to
        outside directors on June 29, 2005. The calculation of earnings per share
        for
        the three months ended March 31, 2005, includes an allocation to preference
        shares and warrants issued by the Company as described below.
  As
        described in Note
        9 - Equity Transactions: Preference Shares, each convertible preference share
        was convertible into two Class C common shares. The basic earnings per share
        calculation for the three months ended March 31, 2005, reflects the rights
        of
        the respective classes of shares to receive distributions of net income (net
        losses are not allocated to preference shares) using the "two-class method"
        described in FAS 128, ‘‘ *Earnings
        Per Share* ’’.
        The
        Company has allocated the pro-rata share of net income to the convertible
        preference shares on a percentage of total weighted average common shares
        outstanding plus the common-equivalent number of weighted average preferred
        shares outstanding. For the three months ended March 31, 2005, the convertible
        preference shares would have added 5,093,898 common shares on a weighted
        average
        basis to diluted shares outstanding. These shares were not included in the
        diluted earnings per share calculation because the effect would have been
        anti-dilutive.
  As
        described in Note 9 - Equity Transactions: Warrants, the Series A warrants
        were
        exercisable for a total of 7,389,725 common shares as adjusted for the
        redesignated and consolidated shares and additional shares that are exercisable
        pursuant to the warrant agreement. The Series A warrant exercise condition
        was
        satisfied on February 8, 2005, and the shares subject to these warrants have
        been treated as outstanding for purposes of basic earnings per share for
        the
        period beginning February 8, 2005 because they are issuable for nominal
        consideration upon exercise of the warrants. The dilutive effect of Series
        A, B
        and C warrants is reduced to the extent that common shares issuable on the
        exercise of Series A warrants are already included in basic weighted average
        common shares outstanding.
  Table
            of Contents
 14
 At
        March 31, 2006, there were
        outstanding exercisable warrants to purchase 98,328 new Class A and 190,544
        new
        Class B common shares, held by parties not affiliated with existing shareholders
        and as discussed above, these warrants have been treated as outstanding for
        purposes of basic earnings per share for the three months ended March 31,
        2006.
  **Note
        12 — Commitments and Contingencies**
  **Litigation**
  In
        connection with the acquisition of the vessel *Sea
        Pantheon* renamed *Tamoyo
        Maiden* the
        Company is seeking damages for the cost of repairs and loss of hire related
        to
        ballast tank contamination discovered after delivery of the vessel. As specified
        in the purchase agreement, the dispute was made in London. The Company, through
        its subsidiary, had an associated vessel that is owned by a company related
        to
        the seller arrested to secure its claim. That vessel was released upon the
        seller providing a bank guarantee in the amount of $2.1 million. The seller
        alleged damages due to the arrest of the associated vessel and the Company,
        as
        required under English law, placed $750,000 on June 6, 2005, as counter-security
        to provide for estimated arbitration/litigation costs. On August 17, 2005,
        legal
        counsel obtained a reduction of $217,500 in the amount of the counter-security
        to $532,500. Arbitration proceedings took place in April 2006 and the Company
        is
        awaiting the decision of the Arbitrator.
 
 The
        Company is periodically a defendant in cases involving personal injury and
        other
        matters that arise in the normal course of business. While any pending or
        threatened litigation has an element of uncertainty, the Company believes
        that
        the outcome of these lawsuits or claims, individually or combined, will not
        materially adversely affect the consolidated financial position, results
        of
        operations or cash flows of the Company.
  **Note
        13 —Joint Venture Agreement**
  In
        November 2005, the Company entered into a joint venture with GMT
        Shipping Line Ltd. to provide liner services to and from the East and North
        Coasts of South America and from and to the West Coast of Africa. The Company
        has a 50% interest in the joint venture and is required to make a capital
        investment of $100,000 and loans of $400,000. The investment in the joint
        venture is accounted for using the equity method. For the three months ended
        March 31, 2006, the Company’s share of the estimated loss from the joint venture
        was $29,393 and is included in other income on the consolidated statement
        of
        operations.
  **Note
        14 — Business Segment**
  The
        Company is managed as a single business unit that provides worldwide ocean
        transportation of dry cargo service to its customers through the use of owned
        and chartered vessels. The vessels are operated as one fleet and when making
        resource allocation decisions, our chief operating decision maker evaluates
        voyage profitability data, which considers vessel type and route economics,
        but
        gives no weight to the financial impact of the resource allocation decision
        on
        an individual vessel basis. The Company's objective in making resource
        allocation decisions is to maximize its consolidated financial results, not
        the
        individual results of the respective vessels or routes.
  The
        Company transports cargo throughout the world, including the U.S. The amount
        of
        voyage revenue generated in countries other than the U.S. is $42.3 million
        and
        $43.0 million for the three months ended March 31, 2005 and 2006,
        respectively.
   Table
            of Contents
 15
 Revenue
        was generated in the following principal foreign geographic areas:
  **Three
                    Months Ended March 31,****Country**
                
                **2005**
                
                **2006**Brazil
                
                $
                14,387,161
                
                $
                15,583,618Japan
                
                
                6,193,476
                
                
                7,673,640Chile
                
                
                6,002,870
                
                
                3,755,228Peru
                
                
                4,275,768
                
                
                4,505,077Venezuela
                
                
                2,610,058
                
                
                2,551,860Korea
                
                
                1,589,759
                
                
                2,251,449China
                
                
                3,842,971
                
                
                3,368,804Others
                
                
                3,445,104
                
                
                3,266,730**$**
                **42,347,167**
                
                **$**
                **42,956,406**
  Revenue
        is attributed to these countries based on the location where the cargo is
        loaded. The difference between total voyage revenues and total revenue by
        country is revenue from the U.S. Time charter revenue by country cannot be
        allocated because the Company does not control the itinerary of the
        vessel.
  One
        customer accounted for 27.3% and 7.3% of charter hire receivables at March
        31,
        2006 and December 31, 2005, respectively. One customer accounted for 16.8%
        and
        6.5% of voyage and time charter revenue for three months ended March 31,2006
        and
        2005, respectively.
  **Item
        2.    Management's
        Discussion and Analysis of Financial Condition and Results of
        Operations**
  This
        Quarterly Report on Form 10-Q contains forward-looking statements within
        the
        meaning of the Private Securities Litigation Reform Act of 1995. These
        statements are only our management's current expectations. They are based
        on our
        management's beliefs and assumptions and on information currently available
        to
        our management. Forward-looking statements include, among other things, the
        information concerning our possible or assumed future results of operations,
        business strategies, financing plans, competitive position, potential growth
        opportunities and the effects of future regulation and competition.
        Forward-looking statements include all statements that are not historical
        facts
        and can be identified by the use of forward-looking terminology such as the
        words "anticipates," "believes," "estimates," "expects," "future," "intends,"
        "plans" and similar terms.
  Forward-looking
        statements involve risks, uncertainties and assumptions. Although the Company
        does not make forward-looking statements unless it believes it has a reasonable
        basis for doing so, it cannot guarantee their accuracy. Actual results may
        differ materially from those expressed in these forward-looking statements
        due
        to a number of uncertainties and risks, including the risks declosed in our
        Form
        10-K filed March 16, 2006, and other unforeseen risks. You should not rely
        on
        any forward-looking statements.
   Table
            of Contents
 16
 **Recent
        Developments**
  On May
        2,
        2006, the Company announced that it took delivery of the multipurpose
        tweendecker *Kibishio
        Maru* to
        be
        renamed *Aztec Maiden* for $8.1
        million The Company expects to fund the acquisition from working
        capital.
  **General**
  The
        following is a discussion of our financial condition at March
        31, 2006 and December 31, 2005 and our results of operations comparing the
        three
        months ended March 31, 2006 with the three months ended March 31, 2005. You
        should read this section in conjunction with the our consolidated financial
        statements including the related notes to those financial statements included
        elsewhere in this Quarterly Report.
  **Overview**
  We
        are an
        ocean transportation services company that offers worldwide shipping solutions
        through liner, parcel, bulk and vessel chartering services. We offer our
        services globally in more than ten countries to over 300 customers through
        a
        network of affiliated service companies.
  Our
        financial results are largely driven by the following factors:
  ·
              macroeconomic
                  conditions in the geographic regions where we
                  operate;
  ·
              general
                  economic conditions in the industries in which our customers
                  operate;
  ·
              changes
                  in our freight and sub-time charter rates — rates we charge for vessels we
                  charter out — and, in periods when our voyage and vessel expenses
                  increase, our ability to raise our rates to pass such cost increases
                  through to our customers;
  ·
              the
                  extent to which we are able to efficiently utilize our controlled
                  fleet
                  and optimize its capacity; and
  ·
              the
                  extent to which we can control our fixed and variable costs, including
                  those for port charges, fuel, commission expense and stevedore
                  and other
                  cargo-related expenses.
  Our
        historical consolidated financial statements for the period prior to June
        29,
        2005, when we completed our initial public offering, show our results of
        operations as a private company.
  **Components
        of revenue and expense**
  We
        report
        our revenue as voyage revenue, reflecting the operations of our vessels that
        are
        not chartered out, and charter revenue, reflecting the operations of our
        vessels
        that have been chartered out to third parties. Voyage
        revenue and expenses for each reporting period include estimates for voyages
        in
        progress at the end of the period. Estimated profits from voyages in progress
        are recognized on a percentage of completion basis by prorating the estimated
        final voyage revenue and expenses using the ratio of voyage days completed
        through period end to total voyage days. When a loss is forecast for a voyage,
        the full amount of the anticipated loss is recognized in the period in which
        that determination is made. Revenue from time charters in progress is calculated
        using the daily charter hire rate, net of daily expenses multiplied by the
        number of voyage days on-hire through period end.
   Table
            of Contents
 17
 ***Voyage
        revenue*** consists
        of freight charges paid to our subsidiaries for the transport of customers'
        cargo. The key factors driving voyage revenue are the number of vessels in
        the
        fleet, the days on hire and the freight rates.
  ***Time
        charter revenue*** consists
        of a negotiated daily hire rate for the duration of the time charter. The
        key
        factors driving time charter revenue are the number of days that vessels
        are
        chartered out and the daily charter hire rates.
  ***Voyage
        expenses*** consist
        primarily of fuel, port costs, stevedoring, commissions and lashing materials,
        which are paid by our subsidiaries.
  ***Vessel
        expenses*** ** are
        vessel operating expenses — crewing, stores, lube oil, repairs and maintenance
        including drydock reserves, registration taxes and fees, insurance and
        communication expenses — for vessels we control, charter hire fees we pay to
        owners for use of their vessels and space charters (relets). The costs are
        paid
        by our subsidiaries.
  ***Depreciation
        and amortization*** ** expense
        is computed on the basis of 30-year useful lives for our vessels.
  ***Management
        fees*** **** are
        paid
        to Roymar for the technical management of controlled vessels and to TBS Shipping
        Services for the operation of vessels. From June 2005, when we purchased
        all the
        stock of TBS Shipping Services and Roymar, management fees are eliminated
        in
        consolidation. We also paid commissions on freight and time charter hire
        to TBS
        Shipping Services that are also eliminated in consolidation from the date
        we
        acquired these companies. Commissions on freight and port agency fees are
        paid
        to TBS Commercial Group Ltd, a company that is owned by our principal
        shareholders.
  These
        management fees and commissions were fixed under agreements that originally
        were
        negotiated during our Chapter 11 proceeding with representatives of the holders
        of our then outstanding First Preferred Ship Mortgage Notes and have been
        approved by our board of directors. Renewal of the current management agreements
        with TBS Commercial Group Ltd. and approval of any new management agreements
        or
        amendments to the current management agreements with TBS Commercial Group
        Ltd.
        are subject to approval by the compensation committee of our Board of
        Directors.
 
 **Lack
        of historical operating data for vessels before their
        acquisition**
  Consistent
        with shipping industry practices, other than inspection of the physical
        condition of the vessels and examinations of classification society records,
        there is no historical financial due diligence process when we acquire vessels.
        Accordingly, we do not obtain the historical operating data for the vessels
        from
        the sellers because that information is not material to our decision to make
        acquisitions, nor do we believe it would be helpful to potential investors
        in
        our common shares in assessing our business or profitability.
 
 Most
        vessels are sold under a standardized agreement, which, among other things,
        provides the buyer with the right to inspect the vessel and the vessel's
        classification society records. The standard agreement does not give the
        buyer
        the right to inspect, or receive copies of, the historical operating data
        of the
        vessel and does not provide for financial information or historical results
        for
        the vessels to be made available to the buyer. Prior to the delivery of a
        purchased vessel, the seller typically removes from the vessel all records,
        including past financial records and accounts related to the vessel. In
        addition, the technical management agreement between the seller's technical
        manager and the seller is automatically terminated and the vessel's trading
        certificates are revoked by its flag state following a change in
        ownership.
 
 Consistent
        with shipping industry practice, we treat the acquisition of a vessel, whether
        acquired with or without charter, as the acquisition of an asset rather than
        a
        business. Due to the differences between the prior owners of these vessels
        and
        the Company with respect to the routes we operate, the shippers and consignees
        we serve, the cargoes we carry, the freight rates and charter hire rates
        we
        charge and the costs we incur in operating our vessels, we believe that our
        operating results will be significantly different from the operating results
        of
        the vessels while owned by the prior owners.
  Table
            of Contents
 18
 EITF
        98-3
        states that "for a transferred set of activities and assets to be a business,
        it
        must contain all of the inputs and processes necessary for it to continue
        to
        conduct normal operations after the transferred set is separated from the
        transferor, which includes the ability to sustain a revenue stream
        by
        providing its output to customers." The purchase of a vessel alone cannot
        operate or generate revenue or constitute a business operation without the
        significant inputs and processes that we provide, as described
        below:
  •
              We
                  provide our own captains, senior officers and crew to the
                  vessels.•
              The
                  vessels are managed by our subsidiary Roymar. All of the functions
                  of
                  vessel management, from technical ship management to crewing, vessel
                  maintenance and drydocking, are conducted by Roymar, in a manner
                  different
                  from the prior manager, according to our exacting
                  standards.•
              The
                  necessary commercial activities — maintaining customer relationships,
                  providing local teams of commercial agents and port captains, offering
                  transportation management skills and logistics solutions — are provided by
                  our subsidiary TBS Shipping Services and our affiliate TBS Commercial
                  Group in a manner different from the former owners.•
              The
                  vessels will operate under our trade name and carry our distinctive
                  Indian
                  tribe naming convention.
  The
        revenue-producing activity of the vessels we purchase will be generated from
        carrying cargoes for our customers on the routes we serve. The vessels we
        purchased are operated by different parties than their former owners, serve
        different customers, carry different cargoes, charge different rates, cover
        different routes and, in all respects engage in a different business with
        different revenues, costs and operating margins.
  In
        short,
        all of the most important elements of operating the assets — in fact, all of the
        elements of the business of ocean transportation other than the vessels
        themselves — are not being purchased with the vessels but will depend on our
        skill and expertise.
  **Results
        of Operations**
  ***Comparison
        of the three months ended March 31, 2005 and March 31,
        2006***
  **Three
                    Months Ended**
                
                **Three
                    Months Ended****March
                    31, 2005**
                
                **March
                    31, 2006**
                
                **Increase
                    (Decrease)****In
                    Thousands**
                
                **As
                    a % of Total Revenue**
                
                **In
                    Thousands**
                
                **As
                    a % of Total Revenue**
                
                **In
                    Thousands**
                
                **Percentage**Voyage
                    revenue
                
                $
                46,135
                
                75.7
                
                $
                49,320
                
                77.4
                
                $
                3,185
                
                6.9Time
                    charter revenue
                
                
                14,774
                
                24.3
                
                
                14,170
                
                22.2
                
                
                (604
                )
                (4.1
                )Other
                    revenue
                
                
                -
                
                -
                
                
                265
                
                0.4
                
                
                265Total
                    revenue
                
                
                60,909
                
                100.0
                
                
                63,755
                
                100.0
                
                
                2,846
                
                4.7Voyage
                    expense
                
                
                18,375
                
                30.2
                
                
                22,737
                
                35.7
                
                
                4,362
                
                23.7Vessel
                    expense
                
                
                19,699
                
                32.3
                
                
                18,631
                
                29.2
                
                
                (1,068
                )
                (5.4
                )Depreciation
                    and amortization
                
                
                2,379
                
                3.9
                
                
                6,474
                
                10.1
                
                
                4,095
                
                172.1Management
                    fees
                
                
                1,267
                
                2.1
                
                
                -
                
                -
                
                
                (1,267
                )General
                    and administrative
                
                
                1,397
                
                2.3
                
                
                5,790
                
                9.1
                
                
                4,393
                
                314.5Total
                    operating expenses
                
                
                43,117
                
                70.8
                
                
                53,632
                
                84.1
                
                
                10,515Income
                    from operations
                
                
                17,792
                
                29.2
                
                
                10,123
                
                15.9
                
                
                (7,669
                )
                (43.1
                )Other
                    (expenses) and incomeInterest
                    expense
                
                
                (1,674
                )
                (2.7
                )
                
                (2,916
                )
                (4.6
                )
                
                (1,242
                )
                74.2Other
                    income
                
                
                75
                
                0.1
                
                
                105
                
                0.2
                
                
                30Net
                    income
                
                $
                16,193
                
                26.6
                
                $
                7,312
                
                11.5
                
                $
                (8,881
                )
                (54.8
                )


Table
            of Contents
 19
 **Voyage
        revenue**
  The
        increase in our voyage revenue for the three months ended March 31, 2006
        as
        compared to the comparable period in 2005 was primarily due to an increase
        in
        revenue tons carried offset by a decrease in freight rates. As mentioned
        above,
        the key factors driving voyage revenue are the number of vessels in the fleet,
        the days on hire and the freight rates.
  Revenue
        tons carried for the three months ended March 31, 2006 as
        compared to the
        comparable period in 2005, increased 265,460
        tons or 34.7% to 1,030,220 tons for the three months ended March 31, 2006
        from
        764,760 tons for the same period in 2005. The increase r evenue
        tons carried is due
        to an increase
        in the number of vessels in our fleet ,
        which
        resulted in a higher
        number of voyages and voyage days.
  Freight
        rates for the three months ended March 31, 2006 as
        compared to the
        comparable period in 2005, decreased $12.46
        per ton or 20.7% to $47.87 per ton in the first quarter of 2006 from $60.33
        per
        ton for the same period of 2005. To
        a
        significant degree, freight rates are set by the market and depend on the
        relationship between the demand for ocean freight transportation and the
        availability of appropriate vessels. During
        the first three months of 2005 demand for dry bulk ocean shipping increased
        significantly due largely to the expansion of economies in East Asia, especially
        China. Beginning in the second half of 2005, freight rates began to decline
        from
        the levels reached earlier in the year as demand declined.
  Included
        in voyage revenue is revenue from high-volume, low-freighted aggregates bulk
        cargo. Excluding this type of bulk cargo, of which we carried 46,732 tons
        for
        the three months ended March
        31,
        2006, average
        freight rates would have been $49.68 per ton. We did not handle aggregates
        bulk
        cargo for the three months ended March
        31,
        2005.
  The
        increase in weighted average number
        of
        vessels in the fleet, the days on hire, excluding
        vessels time-chartered out, freight voyage days and days on hire and the
        decrease in freight rates for
        the
        three months ended March 31, 2005 and 2006 are
        follows:
 **Three
                        Months Ended March 31,**
                    
                    **Increase
                        (Decrease)****2005**
                    
                    **2006**
                    
                    **Amount**
                    
                    **Percentage**Number
                        of vessels (1)
                    
                    
                    18
                    
                    
                    23
                    
                    
                    5
                    
                    
                    27.8Freight
                        voyage days (2)
                    
                    
                    1,616
                    
                    
                    2,031
                    
                    
                    415
                    
                    
                    25.7Days
                        on hire (3)
                    
                    
                    1,731
                    
                    
                    2,223
                    
                    
                    492
                    
                    
                    28.4Freight
                        Rates (4)For
                        all cargoes
                    
                    $
                    60.33
                    
                    $
                    47.87
                    
                    $
                    (12.46
                    )
                    
                    (20.7
                    )Excluding
                        aggregates
                    
                    $
                    60.33
                    
                    $
                    49.68
                    
                    $
                    (10.65
                    )
                    
                    (17.7
                    )
 _____
  (1)
              Weighted
                  average number of vessels in the fleet, not including off-hire
                  days and
                  not including vessels chartered out.(2)
              Number
                  of days that our vessels were earning revenue, not including vessels
                  chartered out.(3)
              Not
                  including vessels chartered out.(4)
              Weighted
                  average freight rates measured in dollars per
                  ton.
   Table
            of Contents
 20
 The
        following table shows revenues attributed to our principal cargoes:
  **Three
                    Months Ended**
                
                **Three
                    Months Ended****March
                    31, 2005**
                
                **March
                    31, 2006**
                
                **Increase
                    (Decrease)****In
                    Thousands**
                
                **As
                    of % of Total Voyage Revenue**
                
                **In
                    Thousands**
                
                **As
                    of % of Total Voyage Revenue**
                
                **In
                    Thousands**
                
                **Percentage**Steel
                    products
                
                $
                19,370
                
                
                42.0
                
                $
                19,519
                
                
                39.6
                
                $
                149
                
                
                0.8Metal
                    concentrates
                
                
                7,250
                
                
                15.7
                
                
                6,706
                
                
                13.6
                
                
                (544
                )
                
                (7.5
                )Fertilizers
                
                
                4,802
                
                
                10.4
                
                
                1,092
                
                
                2.2
                
                
                (3,710
                )
                
                (77.3
                )Other
                    bulk cargo and aggregates
                
                
                12,434
                
                
                27.0
                
                
                14,272
                
                
                28.9
                
                
                1,838
                
                
                14.8Agricultural
                    products
                
                
                876
                
                
                1.9
                
                
                6,088
                
                
                12.3
                
                
                5,212
                
                
                595.0Automotive
                    products
                
                
                680
                
                
                1.4
                
                
                914
                
                
                1.9
                
                
                234
                
                
                34.4Other
                
                
                723
                
                
                1.6
                
                
                729
                
                
                1.5
                
                
                6
                
                
                0.8Total
                    voyage revenue
                
                $
                46,135
                
                
                100.0
                
                $
                49,320
                
                
                100.0
                
                $
                3,185
                
                
                6.9
 **Time
        charter revenue**
 
 Time
        charter revenue decreased 4.1% to $14.2 million for the three months ended
        March
        31, 2006 from $14.8 million for the comparable period in 2005. As mentioned
        above, the key factors driving time charter revenue are the number of days
        that
        vessels are chartered out and the daily charter hire rates.
  The
        decrease in time charter revenue was due to a decline in the average charter
        hire rate, which decreased $6,086 per day or 30.8% to $13,665 for the three
        months ended March 31, 2006 from $19,751 for the comparable period in 2005.
        This
        decrease is primarily due to the current softness in the overall worldwide
        shipping markets. Charter hire rates are set, to a significant degree, by
        the
        market and depend on the relationship between the demand for ocean freight
        transportation and the availability of appropriate vessels. The decrease
        in
        average charter rates was offset by an increase in the chartered vessel days,
        which increased 289 days or 38.6% to 1,037 for the three months ended March
        31,
        2006 days from 748 days for the same period in 2005. The increase in time
        charter days resulted because of an increase in the number of vessels in
        our
        fleet and from us chartering out more vessels to better position vessels
        to meet
        customer demands and to take advantage of time chartering opportunities on
        some
        voyages that did not have backhaul cargoes.
  The
        increase in number of vessels time chartered out, time charter days and the
        decrease in daily charter rates for the three months ended March 31, 2005
        and
        2006 are as follows:
  **Three
                    Months Ended March 31,**
                
                **Increase
                    (Decrease)****2005**
                
                
                **2006**
                
                
                **Amount**
                
                
                **Percentage**Number
                    of vessels (1)
                
                
                8
                
                
                12
                
                
                4
                
                
                50.0Time
                    Charter days (2)
                
                
                748
                
                
                1,037
                
                
                289
                
                
                38.6Daily
                    charter hire rates (3)
                
                $
                19,751
                
                $
                13,665
                
                $
                (6,086
                )
                
                (30.8
                )
 __________
  (1)
              Weighted
                  average number of vessels chartered out.(2)
              Number
                  of days vessels earned charter hire.(3)
              Weighted
                  average charter hire rates.
   Table
            of Contents
 21
 **Voyage
        expense**
 
 Voyage
        expense consists of costs attributable to specific voyages. The number of
        voyage
        days is a significant determinant of bunker fuel costs, voyage expense and
        commissions. The following table shows the change in the number of voyage
        days
        for the three months ended March 31, 2006 as compared to the same period
        in
        2005.
  **Three
                    Months Ended March 31,****2005**
                
                **2006**
                
                **Increase
                    (Decrease)**Freight
                    voyage days
                
                1,616
                
                2,031
                
                415
                
                25.7
                %Time
                    charter days
                
                748
                
                1,037
                
                289
                
                38.6
                %Total
                    voyage days
                
                2,364
                
                3,068
                
                704
                
                29.8
                %
 
  **Three
                    Months Ended**
                
                **Three
                    Months Ended****March
                    31, 2005**
                
                **March
                    31, 2006**
                
                **Increase
                    (Decrease)****In
                    Thousands**
                
                **As
                    a % of Voyage Expense**
                
                **As
                    a % of Revenue**
                
                **In
                    Thousands**
                
                **As
                    a % of Voyage Expense**
                
                **As
                    a % of Revenue**
                
                **In
                    Thousands**
                
                **Per-centage**
                
                **As
                    a % of Revenue**Fuel
                    expense
                
                $
                5,678
                
                30.9
                
                9.3
                
                $
                9,485
                
                41.7
                
                14.9
                
                $
                3,807
                
                67.0
                
                5.6Commission
                    expense
                
                
                3,894
                
                21.2
                
                6.4
                
                
                2,686
                
                11.8
                
                4.2
                
                
                (1,208
                )
                (31.0
                )
                (2.2
                )Port
                    call expense
                
                
                4,187
                
                22.8
                
                6.9
                
                
                5,213
                
                22.9
                
                8.2
                
                
                1,026
                
                24.5
                
                1.3Stevedore
                    and othercargo-related
                    expense
                
                
                2,453
                
                13.3
                
                4.0
                
                
                3,277
                
                14.5
                
                5.1
                
                
                824
                
                33.6
                
                1.1Miscellaneous
                      voyage expense
                
                
                2,163
                
                11.8
                
                3.6
                
                
                2,076
                
                9.1
                
                3.3
                
                
                (87
                )
                (4.0
                )
                (0.3
                )Voyage
                    expense
                
                $
                18,375
                
                100.0
                
                30.2
                
                $
                22,737
                
                100.0
                
                35.7
                
                $
                4,362
                
                23.7
                
                5.5
  Voyage
        expense increased 23.7% for the three months ended March 31, 2006 as compared
        to
        the same period in 2005. The increase was due to an increase in fuel expense,
        port call expense, stevedore and other cargo related expense, offset by a
        decrease in commission expense. The 5.5% increase in voyage expense as a
        percentage of revenue, to 35.7% of revenue for the three months ended March
        31,
        2006 from 30.2% of revenue for the comparable period in 2005, was primarily
        due
        to the increase in fuel expense.
  The
        67.0%
        increase in fuel expense was due to both an increase in the average price
        per
        metric ton ("MT") and consumption. For the three months ended March 31, 2006,
        the average price per MT and
        consumption increased to $351 per MT and 27,053 MT, respectively, from $251
        per
        MT and 22,659 MT for the same period in 2005. The increase in consumption
        was
        primarily due to a 25.7% increase in the number of voyage days during the
        first
        quarter of 2006, which increased to 2,031 days for the three months ended
        March
        31, 2006 from 1,616 days for the same period in 2005.
  The
        31.0%
        decrease in commission expense for the three months ended March 31, 2006
        as
        compared to the same period in 2005 was due to the elimination in consolidation
        of commissions paid to TBS Shipping Services Inc (“Services”). After we acquired
        Services and it became a part of our consolidation, we eliminated commissions
        paid in consolidation.
  Table
            of Contents
 22
 The
        24.5%
        increase in port call expense was primarily due to the increased number of
        port
        calls and port days, which increased to   220 port calls and 1,349
        days, respectively, for the three months ended March 31, 2006, from 195 port
        calls and 916 days, respectively for the same period in 2005.
  The
        increase in stevedore and other cargo-related expenses for the three months
        ended March 31, 2006, resulted from increased   cargo volume, which
        increased to 1,030,220 revenue tons for the three months ended March 31,
        2006,
        from 764,760 revenue tons for the same period in 2005. As a percentage of
        voyage
        revenue, cargo booked under full or partial free-in free-out terms (shipments
        that the customer pays all or part of the costs of loading and unloading)
        increased to 87.5% of voyage revenue for the three months ended March 31,
        2006,
        from 80.7% of voyage revenue for the same period in 2005 and cargo booked
        under
        full liner terms (shipments where we bear the costs of loading and unloading)
        decreased to 12.5% of voyage revenue for the three month ended March 31,
        2006,
        from 19.3% of voyage revenue for the same period in 2005.
 
 **Vessel
        expense**
 
 Vessel
        expense consists of costs we incur to own and maintain our fleet that are
        not
        allocated to a specific voyage, such as charter hire rates for vessels we
        charter-in and drydocking, maintenance, insurance and crewing expenses for
        vessels we control. The following table sets forth the basic components of
        vessel expense:
 
 **Three
                    Months Ended**
                
                **Three
                    Months Ended****March
                    31, 2005**
                
                **March
                    31, 2006**
                
                **Increase
                    (Decrease)****In
                    Thousands**
                
                **As
                    of % of Vessel Expense**
                
                **In
                    Thousands**
                
                **As
                    of % of Vessel Expense**
                
                **In
                    Thousands**
                
                **Percentage**Chartered-in
                    vessel expense
                
                $
                12,377
                
                62.8
                
                $
                7,148
                
                38.4
                
                $
                (5,229
                )
                (42.2
                )Owned
                    vessel expense
                
                
                7,322
                
                37.2
                
                
                11,001
                
                59.0
                
                
                3,679
                
                50.2Space
                    charter expense
                
                
                -
                
                -
                
                
                482
                
                2.6
                
                
                482
                
                -Vessel
                    expense
                
                $
                19,699
                
                100.0
                
                $
                18,631
                
                100.0
                
                $
                (1,068
                )
                (5.4
                )
  The
        5.4%
        decrease in vessel expense for the three months ended March 31, 2006 as compared
        to the same period in 2005 was primarily due to a change in the composition
        of
        our fleet. For the three months ended March 31, 2006, the composition of
        our
        fleet was an average of 31 owned vessels and 5 chartered-in vessels as compared
        to an averaged of 21 owned vessels and 8 chartered-in vessels during the
        same
        period in 2005. The increase in owned vessels decreased our demand for
        chartered-in vessels for the first quarter of 2006.
 
 The
        42.2%
        decrease in chartered-in vessels for the three months ended March 31, 2006
        as
        compared to the same period in 2005 resulted from our chartering-in vessels
        for
        226 fewer vessel days for the three months ended March 31, 2006. We chartered-in
        vessels for 470 days for the first quarter of 2006 as compared to 696 days
        for
        the same period in 2005. A decrease in the average charter-in rate per day,
        which decreased $2,577 per day, or 14.5%, to $15,209 per day for the three
        months ended March 31, 2006 from $17,786 per day for the same period in 2005
        also added to the decrease in chartered-in vessel expense.
 
 The
        50.2%
        increase in owned vessel expense for the three months ended March 31, 2006
        as
        compared to the same period in 2005 was due to a change in the composition
        of
        our fleet which increased to an average of 31 owned vessels for the three
        months
        ended March 31, 2006 from an average of 21 owned vessels for the same period
        in
        2005. The increase in average owned vessels translated to a 56.5% or 1,007
        days
        increase in vessel days to 2,790 days for the three months ended March 31,
        2006
        from 1,783 days for the same period in 2005. Operating expense day rates
        were
        relatively flat at $4,116 per day and $4,106 per day for the three months
        ended
        March 31, 2006 and 2005, respectively.
  Table
            of Contents
 23
 The
        3.1%
        decrease in vessel expense as a percentage of revenue for the three months
        ended
        March 31, 2006, as compared to the same period in 2005 was primarily due
        to an
        increase in revenue of $2.8 million and a $5.2 million decrease in chartered-in
        vessel cost offset by a $3.7 million increase in owned vessel
        expense.
 
 **Depreciation
        and amortization**
 
 The
        $4.1
        million increase in depreciation and amortization expense was mainly due
        to the
        growth of our controlled fleet, which increased to an average of 31 vessels
        for
        the three months ended March 31, 2006, from an average of 21 vessels for
        the
        same period in 2005
 
 **Management
        fees**
 
 We
        paid
        management fees to our affiliated service companies, Roymar for technical
        management and TBS Shipping Services for operational management. In connection
        with our initial public offering, we purchased the stock of these two service
        companies and accordingly, their results of operations have been included
        in our
        consolidated financial statements as of the date of their acquisition in
        June
        2005. During the first quarter 2006, while we continued to pay management
        fees,
        the fees were eliminated in our consolidated financial statements and the
        actual
        costs of operations of these service companies have been included in general
        and
        administrative expenses. Management fees paid during the first quarter of
        2005,
        prior to our acquisitions of these service companies, are included as management
        fees.
  Technical
        management fee expense was $1.1 million for the three months ended March
        31,
        2006, prior to the elimination in consolidation, as compared to $695,000
        for the
        same period in 2005. The increase was due to an increase in the average number
        of vessels under management, which increased to an average of 31 vessels
        for the
        three months ended March 31, 2006, from an average of 18 vessels for the
        same
        period in 2005. At March 31, 2006 and 2005, there were 31 and 21 vessels,
        respectively, under management.
  Operational
        management fee expense was $889,000 for the three months ended March 31,
        2006,
        prior to the elimination in consolidation, as compared to $572,000 for the
        same
        period in 2005. Management fees are based on voyage days, which increased
        704
        days or 29.8 % to 3,068 days for the three months ended March 31, 2006 from
        2,364 days for the same period in 2005.
  **General
        and administrative expense**
 
 The
        $4.4
        million increase in general and administrative expense for the three months
        ended March 31, 2006 as compared to the same period in 2005 was primarily
        due to
        the inclusion of $3.4 million of Roymar and TBS Shipping Services operating
        costs (mainly salary and related costs) after our acquisition of these companies
        in June 2005. Prior to our acquisition these service companies charged us
        management fees and commissions, and accordingly, the costs were reflected
        as
        management fees and as part of voyage costs. The increase in general and
        administrative expense was also due to $1.0 million of additional professional
        fees that we incurred as a public company and travel and representation expenses
        reflecting the growth of our business.
 
 **Income
        from operations**
 
 The
        $7.7
        million decrease in income from operations for the three months ended March
        31,
        2006 as compared to the three months ended March 31, 2005, was mainly
        attributable to an increase in voyage expense (specifically fuel costs),
        depreciation and general and administration expense. The increase in expenses
        was partially offset by an increase in revenue. For the same reasons, our
        operating margin decreased to 15.9% for the three months ended March 31,
        2006
        from 29.2% for the same period in 2005.
 
 **Interest
        expense**
 
 The
        74.2%
        increase in interest expense for the three months ended March 31, 2006, as
        compared to the same period in 2005 was due to $64.0 million in additional
        long
        term mortgage borrowings drawn down subsequent to March 31, 2005 and an increase
        in interest rates.
  Table
            of Contents
 24
 ***Liquidity
        and Capital Resources***
  Our
        principal sources of funds, prior to our initial public offering, were operating
        cash flows, issuance of long-term debt securities and long-term bank borrowings.
        Our principal uses of funds were capital expenditures to establish and grow
        our
        fleet and maintain the quality of our ships and keep us in compliance with
        international shipping standards and regulations, fund working capital
        requirements and make principal repayments on outstanding loan facilities
        and
        capital lease obligations.
 
 Our
        practice has been to acquire ships using a combination of funds received
        from
        operating cash flows, debt secured by mortgages on our ships and long-term
        capital lease arrangements. We expect to use our operating cash flows, not
        otherwise committed to the payment of interest and principal on outstanding
        debt
        and borrowings to fund vessel acquisitions. Our business is capital intensive
        and its future success will depend on our ability to maintain a high-quality
        fleet through the ongoing maintenance of our currently owned ships and the
        acquisition of ships. These acquisitions will be principally subject to
        management's expectation of future market conditions as well as our ability
        to
        acquire appropriate ships on favorable terms.
 
 At
        March
        31, 2006, we had negative working capital of $7.9 million, due primarily
        to the
        timing of our last two vessel acquisitions. It is our practice to fund vessel
        acquisitions through working capital, which we subsequently replenish with
        long-term debt secured by a mortgage for typically 60% of the vessel cost.
        The
        vessels *Nyack
        Princess* and *Sioux Maiden* were
        purchased in early November 2005 for $10.0 million and $17.5 million,
        respectively, and were funded solely with our working capital. We had
        anticipated having positive working capital by the first quarter of 2006;
        however, because of a continuing softness of the overall shipping market
        we had
        reduced income levels during the first quarter of 2006 which kept us from
        building working capital.
  We
          are in
          negotiations with lenders to consolidate the majority of our debt with
          a single
          lender and to restructure our exiting debt. We believe that our current
          cash
          balance as well as operating cash flows and available borrowings under
          our
          existing credit facilities will be sufficient to meet our liquidity needs
          for
          the next twelve months.
  **Changes
        in Cash and Cash Equivalents**
  Cash
        and
        cash equivalents at March 31, 2006 and December 31, 2005 were $25.0 million
        and
        $27.2 million, respectively. The decrease in cash and cash equivalents was
        the
        result of $13.3 million in net cash provided by operating activities offset
        by
        $6.3 million in net cash used in investing activities and $9.2 million in
        net
        cash used in financing activities.
  **Cash
        Flows from Investing Activities**
  Net
        cash
        used in investing activities was $6.3 million and $186.1 million during the
        three months ending March 31, 2006 and the year ending December 31, 2005,
        respectively. For the three months ended March 31, 2006, investing activities
        consisted of vessel improvements and other assets of $5.0 million, a vessel
        deposit on the vessel *Kibishio
        Maru* of
        $0.8
        million and $0.5 million in investments in and loans to a
        joint
        venture with GMT
        Shipping Line Ltd. to provide liner services to and from the East and North
        Coasts of South America and from and to the West Coast of Africa. For fiscal
        year 2005 investing activities consisted of vessel acquisitions and capital
        improvements of $178.2 million, $7.3 million cash paid (after deducting cash
        acquired and paying undistributed earnings of each company for the period
        January 1, 2005 through the date of acquisition) for all the stock of TBS
        Shipping Services and Roymar and approximately $533,000 security paid in
        connection with a claim relating to the acquisition of the vessel *Tamoyo
        Maiden* (formerly the *Sea
        Pantheon* ).
  For
        the
        three months ended March 31, 2006, we paid $5.0 million for vessel improvements
        and other assets, consisting of $4.1 million of vessel capital improvements
        and
        $0.9 million for the purchase of other assets, including equipment which
        enable
        self-loading and discharging (“Grabs”) and computer equipment for vessels.
  During
        fiscal year 2005, we acquired 14 vessels excluding the *Rockaway
        Belle* and *Comanche
        Belle* on which
        we exercised our purchase options. We paid $178.2 million during 2005 consisting
        of: $163.9 million paid upon delivery of vessels, take over costs of $11.1
        million incurred in connection with the acquisition of the vessels, vessel
        capital improvements of $2.0 million and the purchase of other assets of
        $1.2
        million.
  Table
            of Contents
 25
 At
        December 31, 2005, we had an executed memorandum of agreement for the
        acquisition of the *Kibishio
        Maru* (to be
        renamed the *Aztec Maiden* )
        for a
        purchase price of $8.1 million. As noted above a deposit of $0.8 million
        was
        made in January 2006 and the balance of $7.3 million was paid on May 2, 2006
        when the vessel was delivered.
  **Cash
        Flows from Financing Activities**
  Net
        cash
        used in financing activities was $9.2 million during the three months ended
        March 31, 2006 made up of $8.6 million in repayment of debt principal and
        $0.6
        million in repayment of obligations under capital leases. During 2005, net
        cash
        provided by financing activities was $118.8 million consisting of: $61.7
        million
        of net proceeds from the issuance of Class A common shares in our initial
        public
        offering and $95.0 million long-term bank borrowings to finance the purchase
        of
        vessels, reduced by $37.7 million of repayments of obligations under capital
        leases and debt principal and payment of a dividend on preferred stock of
        $150,000. Repayments of obligations under capital leases include the payments
        of
        the purchase options of $2.5 million and $3.8 million for the *M.V.
        Rockaway Belle and M.V. Comanche Belle,* respectively, We borrowed $12.0 million under our revolving credit facility
        on
        June 17, 2005 to fund our working capital. We used a portion of the net proceeds
        of our initial public offering to repay this borrowing under the revolving
        credit facility on June 30, 2005.
  **Charter
        Hire Receivables**
  Our
        gross
        charter hire receivables balance at March 31, 2006 and December 31, 2005
        was
        $18.3 million ($17.8 million net of allowance for doubtful accounts) and
        $26.2
        million ($25.5 million net of allowance for doubtful accounts), respectively.
        The decrease in receivables was due principally to the collection of several
        larger than usual outstanding receivables at December 31, 2005, including
        the
        receivable from Military Sealift Command of $2.2 million and a decrease in
        outstanding receivables, resulting from a decrease in freight rates at March
        31,
        2006 as compared to December 31, 2005.
  In
        accordance with our reserve policy, we take a percentage of outstanding
        receivables, based on prior years' experience, as a general reserve — usually
        between 2% and 3% of the receivables balance. Our management also identifies
        specific receivables that it believes we will have difficulty collecting
        and
        creates additional reserves for those balances. At March 31, 2006, our general
        reserve totaled $0.5 million with no additional reserves. At December 31,
        2005,
        our general reserve and additional reserves totaled $0.6 million and $0.1
        million, respectively.
  **Fuel
        and Other Inventories**
  The
        fuel
        and other inventory at March 31, 2006 decreased $1.0 million from the December
        31, 2005 balance. Approximately $1.4 million of the decrease was due to lower
        quantities of fuel and lubricating oil at March 31, 2006, resulting principally
        from the timing of vessel refueling. The decrease was offset by an increase
        of
        approximately $0.4 million due to higher fuel prices, which increased to
        a
        combined average of $382 per metric ton for industrial fuel oil/marine diesel
        oil (“IFO/MDO”) at March 31, 2006 from a combined average price of $352 per
        metric ton for IFO/MDO at December 31, 2005.
  **Prepaid
        Expenses**
  Prepaid
        expense at March 31, 2006 decreased $0.7 million from the December 31, 2005
        balance. Prepaid expenses is principally comprised of prepaid insurance which
        decreased $0.4 million to $0.9 million at March 31, 2006 from $0.5 million
        at
        December 31, 2005 and prepaid charter hire which decreased $0.3 million to
        $0.2
        million at March 31, 2006 from $0.5 million at December 31,
        2005.
   Table
            of Contents
 26
  **Other
        Commitments**
  Our
        contractual obligations as of March 31, 2006 are shown in the following
        table:
  **Total**
                
                **Less
                    than 1 year**
                
                **1-3
                    years**
                
                **3-5
                    years**
                
                **More
                    than 5 years**Debt
                    Obligations (1)
                
                
                97,151
                
                
                32,400
                
                
                57,443
                
                
                7,308
                
                
                -Capital
                    lease obligations
                
                
                24,121
                
                
                3,743
                
                
                20,378
                
                
                
                
                
                -Operating
                    Lease obligations
                
                
                8,733
                
                
                8,163
                
                
                570
                
                
                -
                
                
                -Other
                    Purchase obligations (2)
                
                
                7,300
                
                
                7,300
                
                
                -
                
                
                -
                
                
                -Total
                    contractual cash obligations
                
                $
                137,305
                
                $
                51,606
                
                $
                78,391
                
                $
                7,308
                
                $
                -
  (1)
              As
                  of March 31, 2006, we had $97.2 million of indebtedness outstanding
                  under
                  loans to our subsidiaries that we guarantee, consisting of $14.2
                  million
                  under the $22.5 million credit facility with a group of lenders
                  led by
                  GMAC Commercial Finance LLC, $8.1 million under the $15.0 million
                  credit
                  facility with Merrill Lynch Business Financial Services, Inc.,
                  $6.2
                  million under the $7.2 million credit facility with the Royal Bank
                  of
                  Scotland plc, $33.1 million under the $45.0 million credit facility
                  with
                  AIG Commercial Equipment Finance, Inc, $20.3 million under the
                  $25.0
                  million credit facility with Bank of America and $15.3 million
                  under
                  the $17.5 million credit facility with Merrill Lynch Business
                  Financial Services.
 
 At
        December 31, 2005, we did not meet specified EBITDA to debt ratios required
        under the AIG and Bank of America credit facilities. We obtained a wavier
        from
        AIG, dated December 31, 2005, to waive the covenant violation as of December
        31,
        2005. AIG has also agreed to reduce the required EBITDA to debt service ratio
        from 2.0 to 1.0 to 1.6 to 1.0 at March 31, 2006, June 30, 2006, September
        30,
        2006 and December 31, 2006, after which it will revert to the original ratio
        requirement. We were in compliance with the AIG covenants at March 31, 2006.
        On
        March 3, 2006, the Bank of America agreed to waive the EBITDA to debt service
        ratio requirement for the quarter ended December 31, 2005, and to amend the
        credit facility agreement to change the method used in calculating the EBITDA
        to
        debt service ratio. We were in compliance with the BOA covenants at March
        31,
        2006.
  On
        December 15, 2005, the Merrill Lynch credit facility was amended removing
        the
        requirement for us to maintain positive working capital. In addition, the
        credit
        facility agreement requires minimum collateral coverage and requires mandatory
        prepayment or delivery of additional security in the event that the fair
        market
        value of the acquired vessels falls below 160% of the outstanding loan balances.
        As required by the credit facility, we prepaid approximately $2.3 million
        during
        the first quarter of 2006.
  (2)
              We
                  entered into a memorandum of agreement to purchase the*Kibishio
                  Maru*(to be renamed the*Aztec
                  Maiden*)
                  for a purchase price of $8.1 million. We paid a deposit of $0.8
                  million in
                  January 2006 and the balance of $7.3 million when we took delivery
                  on May
                  2, 2006.
  ***Dividend
        Policy***
  We
        have
        not declared or paid and do not anticipate declaring or paying any cash
        dividends on our common shares in the foreseeable future. The provisions
        of some
        of our debt instruments and related loan agreements prevent some of our
        subsidiaries from paying dividends to TBS
        International Limited, which may restrict our ability to pay dividends on
        our
        common shares. The timing and amount of future cash dividends, if any, would
        be
        determined by our board of directors and would depend upon our earnings,
        financial condition, cash requirements and obligations to lenders at the
        time.
    Table
            of Contents
 27
 Pursuant
        to Bermuda law, we cannot declare or pay a dividend, or make a distribution
        out
        of contributed surplus, if there are reasonable grounds for believing that
        we
        are, or after the payment would be, unable to pay our liabilities as they
        become
        due, or that the realizable value of our assets would thereby be less than
        the
        aggregate of our liabilities, our issued share capital and our share premium
        accounts.
  Because
        we are a holding company with no material assets other than the stock of
        our
        subsidiaries, our ability to pay dividends will depend on the earnings and
        cash
        flow of our subsidiaries and their ability to pay dividends to us.
  ***Significant
        Related Party Transactions***
  Pursuant
        to agency agreements, our operations have been planned, executed and supervised
        by TBS Shipping Services, Roymar and TBS Commercial Group and its subsidiaries
        in exchange for fees and commissions paid by us to such entities. Messrs
        James W. Bayley, Lawrence A. Blatte, Gregg L. McNelis, Captain Alkis N. Meimaris
        and Joseph E. Royce, collectively beneficially own approximately 64.3% of
        our
        issued and outstanding common shares. Each of these individuals is also a
        principal of, and together control, TBS Commercial Group. Lawrence A. Blatte,
        Gregg L. McNelis, Captain Alkis N. Meimaris and Joseph E. Royce had been
        principals of and together controlled TBS Shipping Services and Roymar prior
        to
        our acquisition of these companies in June 2005. See Note - 3 Acquisition
        of TBS
        Shipping Services and Roymar in the consolidated financial statements. We
        believe that the transactions described below are on terms no less favorable
        than those that could be obtained pursuant to arm's-length negotiations with
        independent third parties.
  We
        have
        established long-term commercial and operational relationships with other
        commercial agency service companies that are located in various overseas
        ports
        in which we conduct our business. The majority of these companies are wholly-
        or
        partly-owned direct or indirect subsidiaries of TBS Commercial Group. Under
        the
        arrangements with these commercial agents, we generally pay a commission
        on
        freight revenue booked by the agent, which commission is based upon market
        rates
        and on certain freights where they attend to the receivers of the cargo.
        Under
        the arrangements with the ship agents, we pay fees to the agents for attending
        vessels while in port, which fees are also based on market rates for such
        services. For the three months ended March 31, 2005 and 2006, we paid TBS
        Commercial Group $ 1.4 million and $ 1.7 million, respectively.
  Globe
        Maritime Limited (“Globe”), owned by James W. Bayley, acts as our chartering
        broker and charges commissions for arranging charters and the sale and purchase
        of vessels through December 31, 2005. Commissions paid to Globe are based
        upon
        market rates. For the three months ended March 31, 2005, we paid Globe Maritime
        $16,548. Globe received no payments for the three months ended March 31,
        2006.
  TBS
        Shipping Services maintains an office in Yonkers, New York that is leased
        from
        our chairman and chief executive officer, Joseph E. Royce. For the three
        months
        ended March 31, 2005 and 2006 payments to Mr. Royce under this lease totaled
        $60,000 for each quarter. Lease payments of $240,000 per year are required
        under
        the lease.
  Mr.
        Blatte, who became and an officer of the Company in March 2005, provided
        and was
        paid for legal and consulting services to the Company and its affiliates
        prior
        to him becoming an officer. During the three months ended March 31, 2005,
        the
        Company paid Mr. Blatte $180,676 for legal services. During the three months
        ended March 31, 2005, TBS Shipping Services Inc. made payments totalling
        $150,000 to Mr. Blatte for legal services. Effective January 1, 2006, Mr.
        Blatte
        retired as a lawyer and did not perform any legal services for the Company
        or
        its affiliates.
  Our
        board
        has delegated authority to the compensation committee to review and approve
        on
        an annual basis all transactions with our executive officers, directors and
        affiliates.
   Table
            of Contents
 28
 ***Summary
        of Critical Accounting Policies***
  The
        Company’s discussion and analysis of its results of operations, financial
        condition and liquidity are based upon the Company’s consolidated financial
        statements, which have been prepared in accordance with accounting principles
        generally accepted in the United States of America. The preparation of these
        financial statements requires the Company to make estimates and judgments
        that
        affect the reported amounts of assets and liabilities and disclosure of
        contingent assets and liabilities at the date of the financial statements
        and
        the reported amounts of revenues and expenses during the reporting period.
        The
        Company bases its estimates on historical experience and on various other
        assumptions that are believed to be reasonable under the circumstances. Actual
        results may materially differ from these estimates under different assumptions
        or conditions.
 
 Critical
        accounting policies are those that reflect significant judgments or
        uncertainties and could result in materially different results under different
        assumptions and conditions. We believe that there has been no change in or
        additions to our critical accounting policies from those disclosed in our
        Form
        10-K filed March 16, 2006.
  ***New
        Accounting Pronouncements***
  In
        May
        2005, the Financial Accounting Standards Board (‘‘FASB’’) issued SFAS No. 154,
‘‘ *Accounting
        Changes and Error Corrections* ’’
        (‘‘SFAS 154’’), which replaces Accounting Principles Board Opinion (‘‘APB’’) No.
        20 ‘‘ *Accounting
        Changes* ’’,
        and
        SFAS No. 3, ‘‘ *Reporting
        Accounting Changes in Interim Financial Statements* ’’.
        SFAS
        154 changes the requirements for the accounting for and reporting of a change
        in
        accounting principle, and applies to all voluntary changes in accounting
        principles, as well as changes required by an accounting pronouncement in
        the
        unusual instance that it does not include specific transition provisions.
        Specifically, SFAS 154 requires retrospective application to prior periods’
financial statements, unless it is impracticable to determine the
        period-specific effects or the cumulative effect of the change. SFAS 154
        does
        not change the transition provisions of any existing pronouncement. SFAS
        154 is
        effective for the Company for all accounting changes and corrections of errors
        made beginning January 1, 2006.
  In
        December 2004, the FASB issued SFAS No. 123R, Share-Based Payment (‘‘SFAS
        123R’’). SFAS No. 123R revises previously issued SFAS 123 Accounting for
        Stock-Based Compensation, supersedes APB No. 25 Accounting for Stock Issued
        to
        Employees, and amends SFAS Statement No. 95 Statement of Cash Flows. SFAS
        123R
        requires the Company to expense the fair value of employee share options
        and
        other forms of share-based compensation for the annual periods beginning
        after
        June 15, 2005. The cost is recognized over the period during which an employee
        is required to provide services in exchange for the award. The share-based
        award
        must be classified as equity or as a liability and the compensation cost
        is
        measured based on the fair value of the award at the date of the grant. In
        addition, liability awards will be re-measured at fair value each reporting
        period. The Company adopted SFAS 123R effective January 1, 2006, using the
        modified prospective method which requires measurement of compensation cost
        for
        all stock-based awards at fair value on date of grant and recognition of
        compensation over the service period for awards expected to vest. The adoption
        of SFAS 123R did not have a significant impact on the Company’s consolidated
        results of operations, cash flows or financial position because the use of
        the
        intrinsic value method under Accounting Principles Board Opinion No. 25
        "Accounting for Stock Issued to Employees" previously used by the Company
        and
        the fair value base method currently used under SFAS 123R result in the
        same amount of compensation expense recognized.
  **Item
        3.****Quantitative
        and Qualitative Disclosure About Market Risk**
 
 ***Interest
        Rate Risk:***
  We
        are
        exposed to various market risks associated with changes in interest rates.
        The
        exposure to interest rate risk relates to our floating rate debt. At March
        31,
        2006, we had $88.2 million of floating rate debt with margins over the LIBOR
        rate ranging from 1.5% to 3.7% compared to $96.1 million of floating rate
        debt
        as of December 31, 2005. As an indication of the extent of our sensitivity
        to
        interest rate changes, an increase in the LIBOR rate of 100 basis points
        would
        have decreased our net income and cash flows for the three months ending
        March
        31, 2006 by approximately $221,000 based upon our debt level at March 31,
        2006.
   Table
            of Contents
 29
 ***Foreign
        Exchange Rate Risk:***
  We
        consider the U.S. dollar to be the functional currency for all of our entities.
        Our financial results are affected by changes in foreign exchange rates,
        which could adversely affect our earnings. We generate all of our revenues
        in U.S. dollars, but incur approximately 8.8% of our operating expenses in
        currencies other than U.S. dollars. For accounting purposes, expenses incurred
        in currencies other than U.S. dollars are converted into U.S. dollars at
        the
        exchange rate prevailing on the date of each transaction. At March 31, 2006,
        approximately 4.8% of our outstanding accounts payable were denominated in
        currencies other than U.S. dollars.
  **Item
        4.****Controls
        and Procedures**
  As
        of
        March 31, 2006, an evaluation was performed under the supervision and with
        the
        participation of the Company's management, including the Chief Executive
        Officer
        ("CEO"), Chief Financial Officer ("CFO"), and Chief Accounting Officer ("CAO")
        of the effectiveness of the design and operation of the Company's disclosure
        controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under
        the
        Exchange Act). Based on that evaluation, the Company's management, including
        the
        CEO, CFO and CAO, concluded that the Company's current disclosure controls
        and
        procedures were effective as of March 31, 2006. There have been no changes
        in
        the Company's internal control over financial reporting that have materially
        affected, or are reasonably likely to materially affect, our internal control
        over financial reporting during the period covered by this quarterly
        report.
  **PART
        II**
 **Item
        1.****Legal
        Proceedings**
 
 In
        connection with the acquisition of the vessel *Tamoyo
        Maiden* (formerly the *Sea
        Pantheon)* in
        November 2004, from Rifino Shipping Company Limited, a Cyprus
        corporation, ** we
        are
        seeking damages for the cost of repairs and loss of hire related to ballast
        tank
        contamination discovered after delivery of the vessel. As specified in the
        purchase agreement, the dispute was made in London in accordance with the
        British Arbitration Acts of 1950 and 1979. The Company, through its subsidiary,
        had an associated vessel owned by a company related to the seller arrested
        to
        secure its claim. The vessel was released upon the seller providing a bank
        guarantee in the amount of $2.1 million. The seller alleged damages due to
        the
        arrest of the associated vessel. We paid $750,000 on June 6, 2005, as
        counter-security to provide for estimated arbitration/litigation costs, as
        required under English law. On August 17, 2005, legal counsel obtained a
        reduction of $217,500 in the amount of the counter-security to $532,500.
        Arbitration proceedings took place in April 2006 and we are awaiting the
        decision of the Arbitrator.
 
 We
        are
        periodically a defendant in cases involving personal injury, property damage
        claims and other matters that arise in the normal course of business. While
        any
        pending or threatened litigation has an element of uncertainty, we believe
        that
        the legal proceedings pending against us, individually or in the aggregate,
        will
        not materially adversely affect our consolidated financial position, results
        of
        operations or cash flows.
  **Item
        1A. Risk Factors**
 
 We
        believe that there have not been any material changes to the risk factors
        as
        previously disclosed in our Form 10-K filed March 16, 2006. The Risk Factors
        are
        hereby incorporated in Part II, Item 1A of this Form 10-Q. The risk factors
        and other information included in our Form 10-K should be carefully considered
        prior to making an investment decision with respect to the Company’s stock. The
        risks and uncertainties described in our Form 10-K are not the only ones
        we
        face. Additional risks and uncertainties not presently known to us or that
        we
        currently deem immaterial also may impair our business operations. If any
        of the
        risks occur, our business, financial condition, operating results and cash
        flows
        could be materially adversely affected and the trading price of our common
        stock
        could decline.
 
 **Item
        2****Unregistered
        Sales of Equity Securities and Use of Proceeds**
 
 None.
   Table
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 30
 **Item
        3****Defaults
        Upon Senior Securities**
 
 None.
  **Item
        4****Submission
        of Matters to a Vote of Security Holders**
 
 During
        the first quarter of 2006, no matters were submitted to a vote of security
        holders through the solicitation of proxies or otherwise.
 
 **Item
        5****Other
        Information**
  None.
 
 **Item
        6****Exhibits**
  3.1
              Form
                  of Memorandum of Association*
  3.2
              Bylaws
                  *
  31.1**
              Certification
                  of the Chief Executive Officer pursuant to rules 13a-15(a) and
                  15d-15(a)
                  under the Securities Exchange Act of 1934, as adopted pursuant
                  to Section
                  302 of the Sarbanes-Oxley Act of
                  2002
  31.2**
              Certification
                  of the Chief Financial Officer pursuant to rules 13a-15(a) and
                  15d-15(a)
                  under the Securities Exchange Act of 1934, as adopted pursuant
                  to Section
                  302 of the Sarbanes-Oxley Act of
                  2002
  31.3**
              Certification
                  of the Chief Accounting Officer pursuant to rules 13a-15(a) and
                  15d-15(a)
                  under the Securities Exchange Act of 1934, as adopted pursuant
                  to Section
                  302 of the Sarbanes-Oxley Act of
                  2002
  32.1**
              Certification
                  of the Chief Executive Officer, Chief Financial Officer and Chief
                  Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted
                  pursuant
                  to Section 906 of the Sarbanes-Oxley Act of 2002.
                  ***
 __________
  *
              Incorporated
                  by reference. Filed March 7, 2005 333-123157
  **
              Filed
                  herewith.
  ***
              Pursuant
                  to SEC Release No. 33-8212, this certification will be treated
                  as
                  "accompanying" this Quarterly Report on Form 10-Q and not "filed"
                  as part
                  of such report for purposes of Section 18 of the Securities Exchange
                  Act,
                  as amended, or otherwise subject the liability of Section 18 of
                  the
                  Securities Exchange Act, as amended, and this certification will
                  not be
                  deemed to be incorporated by reference into any filing under the
                  Securities Act of 1933, as amended, or the Securities Exchange
                  Act, as
                  amended, except to the extent that the registrant specifically
                  incorporates it by reference.
   Table
            of Contents
 31
 
  **TBS
        INTERNATIONAL LIMITED & SUBSIDIARIES**
   **Signatures**
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, the Registrant
        has
        duly caused this Quarterly Report on Form 10-Q to be signed on its behalf
        by the undersigned, thereunto duly authorized, on the 11 th day of
        May  2006.
 
 **TBS
                  INTERNATIONAL LIMITED**(Registrant)/s/
                  Joseph E.
                  RoyceJoseph
                  E. Royce
                President
                  and Chief Executive Officer/s/
                  Ferdinand V.
                  LepereFerdinand
                  V. Lepere
                Senior
                  Vice President, Chief Financial Officer/s/
                  Anthony
                  GentileAnthony
                  Gentile
                Controller,
                  Chief Accounting Officer
                      
 32